Good day, everyone, and thank you all for joining us to discuss Equity LifeStyle Properties Second Quarter 2019 Results. Our featured speakers today are Marguerite Nader, our President and CEO; Paul Seavey, our Executive Vice President and CFO; and Patrick Waite, our Executive Vice President and COO. In advance of today's call, management released earnings. Today’s call will consist of opening remarks and a question-and-answer session with management relating to the Company’s earnings release. As a reminder, this call is being recorded.Certain matters discussed during this conference call may contain forward-looking statements in the meanings of the federal securities laws. Our forward-looking statements are subject to certain economic risk and uncertainty. The Company assumes no obligation to update or supplement any statements that become untrue because of subsequent events.In addition, during today's call, we will discuss non-GAAP financial measures as is defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release, our supplemental information and our historical SEC filings.At this time, I'd like to turn the call over to Marguerite Nader, our President and CEO.

Good morning, and thank you for joining us today. Our second quarter results released yesterday showed strong quarter and year-to-date trend. Year-to-date, we increased occupancy by 204 sites, and this quarter marks our 39th consecutive quarter of occupancy growth.Customer demand to live in our communities continues to be high. The ownership transfer activity within our communities shows the strength of the market. The satisfaction of our residents is important to us.Our residents recognize the benefits of community living and choose to live in our communities an average of 10 years. Approximately 50% of our new and used home sales come from residents living in the community and resident referrals to family and friends. This percentage has increased each of the last three years.New residents are interested in our lifestyle offering. They have expressed a strong desire to be part of an active community. Over 40% of our new residents are moving from a site-built home and 25% are moving from an apartment. Year-to-date, our MH revenue, which accounts for 70% of our total revenue, had a growth rate of 5.1%, comprised of 4.5% rate and 60 basis points of occupancy.Our RV revenue, including Thousand Trails, has grown 4.7% year-to-date. This growth has been fueled by growth in our annual income in our Thousand Trails revenue. The annual growth of 6.1% is comprised of 5.1% rate and 1% occupancy. Our Thousand Trails portfolio revenue increased from both dues and upgrades. Year-to-date, we have seen an increase in sales of 13% and an increase of upgrades of 25%.Our self-service volume of transaction increased in the quarter. Our RV revenue through digital channels increased 21%, and our online sales of camping passes increased by 28%. The satisfaction of our RV park guests can be seen in both the length of tenure with us and the third-party feedback we receive.We consistently see customer feedback as a tool to improve the experience for our guests. We are pleased to report that we have 79 properties that have received TripAdvisor Certificates of Excellence for 2019. This distinction is earned by consistently achieving high ratings on TripAdvisor from guests. I'd like to thank our employees for their efforts in delivering another strong quarter at ELS.I will now turn it over to Paul to walk through the numbers in detail.

Thank you, Marguerite, and good morning, everyone. I will discuss our second quarter results and updated guidance for the remainder of 2019. For the second quarter, we reported $0.96 normalized FFO per share and $0.94 FFO per share. Normalized FFO per share was $0.04 higher than the midpoint of our guidance on higher-than-expected core property operating income and the timing of joint venture income we had anticipated would be received in the third quarter.FFO includes expense of approximately $0.02 per share related to early debt retirement. Our core MH rent growth of 5.2% consists of approximately 4.5% rate growth and 70 basis points related to occupancy gains. Our second quarter core RV resort-based rental income growth was 4.1%. Growth in annual and seasonal revenues was in line with expectations and increased 6% and 4%, respectively.Rate growth in our annuals was 5.2%, and we realized approximately 80 basis points of growth from occupancy. Seasonal growth in the quarter came from our properties in California and Florida. We continue to experience strong demand for transient stays across the portfolio as evidenced by the occupancy and rate growth at locations not impacted by weather as well as the strong growth in our membership dues, which I'll discuss in a minute.The majority of the transient guidance miss was occurred in June as a few locations in the Midwest and Northeast experienced heavy rains and colder-than-normal temperatures. As I mentioned, membership dues revenue continued its strong growth pace during the second quarter, showing a 5.8% increase over prior year.During the quarter, we sold approximately 6,600 Thousand Trails camping pass memberships. Year-to-date, we have sold approximately 10,200 camping passes, a 14% increase over the first six months of 2018.In response to customer demand, we have offered a supplement to our membership product that provides access to…

[Operator Instructions] Our first question comes from Nicholas Joseph from Citi. Your line is now open.

Thanks. Maybe just starting with RV. You raised RV revenue guidance for the third time since initially providing it last third quarter. What do you seen on the ground that's driving the reduction? And how comfortable are you with the new guidance of 4.4% for full-year 2019?

Hey, Nick. It’s Patrick. What we're seeing on the ground is consistent demand across all four buckets, annual seasonal and transient. And as Paul just addressed on the annual front, which for the quarters, was just about 70% of our total revenue. So rate growth of 5.2%, occupancy growth of 80 basis points. So that's the key driver of our business and that's why our focus is historically.The miss for the quarter, as you're aware is on the transient side that was impacted by weather. For the quarter, we saw historically high rainfall across the Northern United States. That really affected four properties of ours pretty significantly. Two are closed for a period of time. Two others had a significant number of sites offline for a period of time. Those weather events surpassed us. So I'm comfortable with respect to our demand profile and our view going into the quarter is that we are well positioned and continue to take advantage.

And I think also, Nick, when you look at our RV results, looking at the whole picture, looking at our subscription, our membership revenue, we saw increases in that in the quarter. I mean that's really – that transient customer converting to a member and that's been picked up in that revenue line item.

Thanks. So when you think about the 5.2% that you initially thought for the RV growth versus [4.4%] now, is that 80 basis points mostly weather driven?

There's a combination…

I guess quarter-to-quarter, but…

Sorry, it's a combination, it's weather and then it's that off-spend that what you see in the dues line item or the subscription revenue. You can see the same pickup in there.

Okay. And then maybe just on the balance sheet. You continue to lower leverage. You mentioned prepaying the 2020 debt with the ATM equity. How do you think about the current capital stack in optimizing leverage levels going forward?

Yes. I think in the quarter, we had a debt. It was a relatively small amount of debt. There was a nice opportunity for us to test the ATM. It didn't have meaningful impact on our leverage metric. And I think that as we've said in the past, our focus is on flexibility and being able to access various sources of capital at the appropriate time when an opportunity presents itself.

Thanks.

Thanks Nick.

Thanks Nick.

Thank you. And our next question comes from John Kim with BMO Capital Markets. Your line is now open.

On the RV growth, it seems like the Thousand Trails membership is cannibalizing some of the transient growth more so than in prior years, and I'm wondering why that's the case?

I think what you're seeing there is an increase in our online sales. And if the conversion from the person who came in and intended to be a transient and was – saw the opportunity to become a member or have a subscription revenue model and they chose that. So I think it's just that that increase in activity on the membership side and our customer having the option to choose that.

And do you see the same conversions of members going to annual and seasonal as you do from transients? And also, can you talk about the profitability of the Thousand Trails revenue versus the typical RV business, just given the customer acquisition costs?

Yes. I mean you can see on the conversion from membership and annual and seasonal, you can see in our supplemental we show how many annuals we have inside of the Thousand Trails membership base, which is about 5,000 or so. And we see people coming in on the membership side and then they decide to become an annual.And then we'll also see the transient pickup into the seasonal and then subsequently into the annual. We've seen that change over time, over the last couple of years, an uptick in that activity to where we're seeing more conversions. And that's really just a matter of people staying at the properties for a longer period of time and then deciding that they want to spend more time with us.As to the profitability on the Thousand Trails side, on the supplemental page, it shows the revenue that we have on the dues side, the annuals and the upgrades and – so you see that there, and the profitability is similar to what you see on the overall RV base.

Okay. And then finally, we're hearing from some of the retailers that the low-income consumer is really being pressured by rising rents and that includes by manufacturing housing owners. I guess not so much from your end, but maybe from some of the key buyers in the market. But how much of a concern of this – this is for you and potentially, some of your customers?

I mean I think, what we have is – we do a market survey, which is surveying everything is going on in and around our properties. So what's happening in manufactured home communities, what's happening in single-family, multifamily, et cetera. And so that is how we're deciding how to increase rates.So we're keeping in lockstep with what's happening in the local market, and we don't see that changing anytime soon. We generally send out a significant portion of our rent increases at the end of September, kind of beginning of October, which is how we're able to put out our guidance so early in the year. But at this point, we don't see any change to what you've seen over the last couple of years.

There's no discussions of rent regulations in some of your markets or an increased concern of it?

Well, there's certainly – there are certainly – we've seen properties – there's been a lot of press lately about rent control initiatives across the United States. We have 23 properties right now subject to mandated rent control primarily in California. But we've been actively opposing that rent control – those rent control ordinances for over 20 years, but we've – and we’ve had success in some jurisdictions and others, we just have had operated in a rent-control environment.But when you kind of consider areas of concentration for ELS, in the state of Florida, we've always operated under the terms of a prospectus. The prospectus that runs with the land and it governs their annual rent increases.So we've developed relationship with the homeowners associations, and we spend a lot of time meeting with them and talking about the needs of the residents to achieve fair rent increases. So I think that we certainly see that, but there's also a lot of discussion with our residents about what rent increases should be and what makes sense for them and for the community.

Great. Thank you.

Thanks John.

Thank you. And our next question comes from Samir Khanal with Evercore ISI. Your line is now open.

Hi, Marguerite. I guess just getting back to that question on RV, I mean, when you look at RV shipments on a year-over-year basis, they continue to be down. And yet, your business still – I mean, there's been a bit of a slowdown here, but you're still kind of in that 4.5% range. So I really haven't seen the impact as you would – maybe I would have thought. So when you go back, maybe sort of the last downturn, and I'm sure you track the numbers pretty closely in regards to the RV shipment, was there some sort of a time lag before you started seeing the changes in sort of consumer appetite there?

Yes. I mean certainly, you look at the shipments, I think, they're down – sales are down 8% for RV sales for the year and some of that decline, I think, is weather and some excess inventories. But really how it impacts ELS, it really – you think about our portfolio and it's comprised primarily of longer-term customers staying with us on average 10 years.So they've made that decision to stay at the property and develop roots. So our focus is not really the new RVers as much it is the 9 million installed base of our RVers, and so we're marketing to those RVers. And we didn't see impact in the market last time the RV industry had a blip in that. We don't anticipate seeing one now because we're focused on the installed base.

Okay. Thanks for that. And I guess my second one is, I mean, you did a small acquisition in the quarter. Can you talk about sort of pricing around that and the cap rates?

Sure. So we closed on one property in April that we actually already previously announced that we’ve – in the quarter, we actually closed on two properties. But the new one that we announced today was a property near one of our premier North Carolina properties. The property is 455 sites. That deals was not unlike some of the deals that we've done in our history.This is a seller who previously sold us one of our assets – one of the assets that I just referenced near the asset that we bought. He built the property and the book of the business and then he was ready for an exit. The property has internal expansion sites and the seller is also developing additional sites adjacent to the property that we will purchase once those sites are complete.

Got it, okay. Thanks so much.

Thank you.

Thank you. Our next question comes from Drew Babin with Baird. Your line is now open.

Hey, good morning.

Hey, Drew.

Good morning, Drew.

I would assume based on the transient guidance for the third quarter that the 4 July holiday went well, and I was hoping you could maybe kind of validate that or talk about that. And then give a little color on just – and apologies if I missed this, but just kind of booking pace for the rest of the summer relative to kind of where things were last year? What type of revenue were sort of earned in at this point relative to last year?

Hey, Drew. It's Patrick. With respect to the 4 July, I would say that things trended well and it's reflected in our guidance for the quarter. As I mentioned earlier, we're seeing consistent demand across RV platform that includes all the buckets, annual, seasonal and transient. I think about some of the key drivers were – that summer season, which are the northern campgrounds and resorts across our portfolio.New York has good demand profile, one of our largest transient properties in Lake George. We have a property just outside of Chicago here, that was one of the property that was impacted by weather, but it's pacing favorably today. And in Wisconsin, where another property we had was off-line and another was impacted by the weather events really. Overall, that market is pacing well in addition too. So I would say that that I would expect barring weather events for us to have a solid quarter.

And any of the – I guess cleanup cost or alternatively just kind of missed revenue in the second quarter, is any of that reimbursable or covered by insurance?

Not really, I mean what we had were – kind of property specific events that didn't necessarily cause a significant amount of damage to the property. It was really the adverse conditions, people not wanting to visit the property because it was expected to be colder than typical, and as Patrick said, just a level of precipitation was significant.

And then on the lost revenue, we just have a campaign to work on encouraging that customer to rebook without us.

Sure. Okay, that makes sense. And then secondly, to the extent, and I know that sometimes it gets tricky with the 55 plus communities in Florida where there's a prospectus? Are you finding that tenants are as willing to pay rent increases to pay for upgrades, new amenities things like that, going into the properties and though some of the higher amenity RV properties have a little bit more flexibility to do that? Are you still seeing a customer that's willing to kind of pay up when capital can be put into a property? Or are you seeing a little bit more pushback these days?

I mean I think we're still seeing the same on – the customer feedback or the resident feedback meeting with the homeowners association is such that, and we're working with them. We talk about what the rate increase would be. We talk about the need of the property. We make certain that what we think is important is equally important to rest of the resident base, especially when it comes to an amenity.We may think it's a good idea to put in some new fitness equipment and they may want a pickleball court. So there's just something that we try to figure out the best – kind of the best avenue to go down, and we haven't seen a pushback. And it's really dealing with the homeowners association at each individual property.

Everybody loves pickleball. That's all from me. Thanks.

That's right. Thanks. Take care

Thank you.

Thank you. Our next question comes from John Pawlowski with Green Street Advisors. Your line is now open.

Thanks. Marguerite, has the recent share price run changed your acquisition appetite at all for the balance of this year?

I think we're still in the same place that we've been in that we have properties in all stages of under contract, LOI, et cetera. Certainly, we look to it. As you've seen, we've been using our ATM, and we're engaged with sellers and it's a matter of timing for them in some cases. And in some cases, it's a matter of pricing and what does it mean in terms of – for ELS. But certainly, share price goes into the – factors into the equation.

So are you bidding on more deals? Or are you bidding that harder now?

We're bidding on – I would say that the same amount of deals, it changes by quarter, whether or not it's RV or MH.

Okay.

So I think it's along the same – I don't think, we've continue to have the same disciplined approach to our underwriting and that hasn't changed, but certainly factoring in using our equity.

Okay. And I'm no expert on our Florida prospectuses work. I understand everything is negotiated at the property level. From your monitoring of Florida state politics, is there anything in the hopper today or is there any chatter down the line of just the overarching prospectus system strengthening in the favor of renters?

We haven't really heard anything. I think it's pretty strong. I mean the prospectus is pretty strong. And it's good for us and it's good for prospective residents, good for current residents. So there's a lot of focus on that, when we meet with the individual homeowners association, but we haven't heard anything, any kind of rumblings about a grand scale change in that.

Okay. Thank you.

Thanks, John.

Thank you. [Operator Instructions] Our next question comes from Todd Stender with Wells Fargo. Your line is now open.

Thanks. Just looking at the number of occupied rentals, when you look at new homes versus used homes, I would think that the economics will be better for used. But maybe you guys can just speak to the rental differences between the two and how you're looking at the rental segment?

The economics, I'm not clear, Todd, in your question?

I guess when you look at the numerator for both, are they comparable because I would imagine the denominator would be lower for used, so your economics will be better for used. But that just seemed like it went down in the quarter, but occupied rentals went up for new. Just wondering if you could kind of speak to the differences between the two?

Yes. Todd, so I think you're referring to the mix of the new – occupied new rentals versus occupied used rentals?

That’s right.

And if you compare it to the same period last year, the rental pool is flat, it's right around 4,000. And to your point, the mix reflects an increase of about 460 new and a decrease of about 460 used. That's driven by a couple of factors.One is our focus on reducing the used inventory across the portfolio just because over time becomes a little less efficient to operate those used homes from a maintenance and an operations perspectives. And the focus on new is, more new inventory coming to our portfolio and looking at a mix of sales and rentals in order to manage overall occupancy.And as Marguerite mentioned in her opening comments, also a focus on rental conversions to manage that overall rental load, the total conversions for the quarter are right around 30%. Just for perspective, full-year 2018 was right around 28%, so it's trends that we favorably. But that's our overall goal. You manage that overall rental load that's currently 6% of our overall occupancy and focused on conversions with a bias towards selling used inventory. Does that answer your question?

It sure does. Thank you. Any length of stay differences between the two or compared to last year?

No, we haven't seen a change. The stay is usually two to three years. Some of our conversions are ranging from 18 months to 36 months. It just depends on the community and that customer behavior.

Okay. It’s very helpful. Thank you. Just transitioning to Paul. You spoke about the upgrade sales, I think it averaged 6,700, if I heard that right?

Yes.

Can you talk about some of the underlying factors that fueled that move? And then maybe speak to the cost of achieving that growth just to get a sense of the net impact? Thanks.

Sure. I think that – as we look at the product that we offer to our customer in terms of the upgrade, a lot of that revolves around how they can expand their usage of the properties? How they can enjoy the properties for longer periods of time? How they could access or make the reservation with a greater length of time? So they have more certainty with respect to the site that they can book and so forth. So we packaged those options together and it drives the upgrades.We've seen a pretty consistent increase in the pricing as the customers have opted for more amenities and more added features to their membership over the last couple of years. As it relates to the overall net contribution, I think I mentioned that for the full-year, we anticipate about $2 million net contribution from the membership sales offset by sales and marketing expenses. That's on a total of $17.5-ish million on upgrade sales.

Okay. Got it. All right. Thank you very much.

Sure.

Thank you. And we have a follow-up from John Pawlowski with Green Street Advisors. Your line is now open.

Yes. One modeling follow-up. Paul, could you remind us just average operating margins for both MH and RV portfolios right now? And how much upside over the next few years you think with operating initiatives are left to squeeze?

I think what we’ve seen on the MH side of the business is pretty consistent over our long history, call it a 65% to – it could be up to 70% operating margin, just depending on the location of the property and the rent level.On the RV side, it really – can be quite similar when you're talking about a highly annual property, but when you have a highly transient property in the RV business, those margins could be significantly different, call it, a 35% operating margin if you're reliant on that transient customer and have the risk of a property really being occupied. For example, in the summer, occupied for the weekends, but not occupied during the week.

Okay. And where do we go from here in terms of operating initiatives?

I think that what we try to do on the latter with respect to those transient customers, how do we extend the stay? How do we increase their time with us? Can we get them to stay Sunday into Monday, so that we could drive that? We also have some of our highly transient properties initiatives in place to introduce cabin-type or park-model housing stock, so that we could convert customers to annuals and drive the long-term revenue that way.We see on kind of an average daily rate basis, a reduction in the rent. But over the course of the year, more stability and a reduction in the variable expenses because we don’t have to staff the property quite the same way if it's more fully occupied with the annuals.

Okay. Thank you.

Sure.

Thank you. Since we have no more questions on the line at this time, I would like to turn it back over to Marguerite Nader for closing comments.

Thank you for joining us today. We look forward to updating you on our next quarter's call.

Ladies and gentlemen, thank you for your participation on today's conference. This does concludes your program, and you may all disconnect. Everyone, have a great day.